Yesterday, Iran struck Qatar’s crown jewels — it’s massive LNG and refining complex called Ras Laffan. Reuters spoke with the QatarEnergy CEO:
- For production to restart, first we need hostilities to cease
- These facilities, which cost about $26 billion to build many years ago, should not be attacked
- The annual revenue lost from the three damaged facilities is around $20 billion
- Our exports of condensate will be down around 24%, LPG down 13%, naphtha and sulphur both down 6%, helium down 14%
- We may have to declare force majeure on long-term contracts for up to five years for LNG supplies to Italy, Belgium, Korea and China
- We will be losing 12.8 million tons per year of LNG for three to five years, around 17% of Qatar’s export LNG
- U.S. oil major ExxonMobil is the partner in the damaged trains, holding stakes of 34% in LNG train S4 and 30% in LNG train S6, with QatarEnergy holding the remainder
- Two out of 14 of our LNG trains and one out of two of our gas-to-liquids (GTL) facility were damaged in the attacks
There is some real capacity being taken out here that’s going to keep the LNG market tight for awhile. What’s not clear is how quickly some of these facilities can be brought back online. European natural gas prices are up 30% today.
Israel carried out massive airstrikes on Iran earlier this week, including hits on Iran’s South Pars gas field. In response, Iran targeted Qatar’s Ras Laffan Industrial City — the world’s main natural gas production facility — in two separate waves of missile attacks. Qatar’s Foreign Ministry denounced the attacks as a dangerous escalation and a direct threat to national security.
The CEO’s remarks paint a dire picture of the damage. Two of Qatar’s 14 LNG trains and a gas-to-liquids facility were hit, potentially knocking out 12.8 million tons of annual LNG capacity — roughly 17% of Qatar’s exports — for three to five years. The $20 billion in annual lost revenue and potential force majeure declarations on contracts with Italy, Belgium, Korea, and China underscore how deeply this disrupts global energy supply chains. Qatar supplies about 20% of the world’s LNG, and the Ras Laffan complex accounted for roughly a fifth of global supply before production was halted earlier this month. European and Asian gas prices have already spiked dramatically, and the CEO’s insistence that hostilities must cease before production restarts signals there is no quick resolution in sight.
The moves evidently caused a rift in the White House. Trump said that Israel will no longer attack Iran’s energy infrastructure and that he didn’t know about the strikes. That contrasts with an Axios report that Israel planned and coordinated the attack with the White House.
Hopefully this is the end of energy attacks and creates a path to peace but the market is taking it more as a sign that Iran’s ability to inflict pin-point damage is still intact, as they pre-announced they would be attacking the Exxon facility.
In a separate report that highlights the bizarre nature of this conflict, Treasury Secretary Scott Bessent said that the US may soon remove sanctions from Iranian oil that is stranded on tankers to help lift global supplies and reduce prices.